August 6, 2009

Pilgrim's Pride Corp. is seeking bankruptcy-court approval to enter into a deal with two lenders to arrange a US$1.65 billion loan that would fund the chicken producer's exit from Chapter 11 protection.

Pilgrim's Pride is asking the US Bankruptcy Court in Fort Worth, Texas, to let it enter into an agreement with CoBank ACB and the New York branch of Rabobank International that would allow the lenders to arrange and syndicate a US$1.65 billion credit facility to fund the company's exit from bankruptcy protection.

Pilgrim's Pride, which sought Chapter 11 protection in December 2008, hasn't yet filed with the bankruptcy court a plan describing how it will pay off its debts and emerge from Chapter 11. The company said, however, that the deal with the lenders is an important step toward its exit.

"It is the debtors' intention to emerge from Chapter 11 as expeditiously as possible," Pilgrim's Pride said in court papers filed Tuesday. "Obtaining exit financing is essential for the debtors in order to achieve this goal."

A syndicate of lenders assembled by CoBank and Rabobank is its best bet in light of the substantial amount of financing needed, Pilgrim's Pride said.

"By engaging the assistance of syndication agents and obtaining financing commitments from CoBank and Rabobank, the debtors' chances of establishing an exit facility in the time and amount necessary to exit Chapter 11 by year's end are far greater than they otherwise would be," the company said.

Under the deal with CoBank, a cooperative bank that largely lends to agricultural businesses, and Rabobank, Pilgrim's Pride isn't allowed to solicit any rival financing packages through Sept. 15.

Bankruptcy Judge D. Michael Lynn will consider the arrangement at an Aug. 11 court hearing.

Pilgrim's Pride filed for bankruptcy protection on Dec. 1, 2008, two days before the expiration of a grace period for the company to make a US$25.7 million interest payment. The company was facing a cash crunch as feed costs rose and demand for its chickens slumped.

The Pittsburgh, Texas, company recently said it would idle two of its chicken processing plants as it continues efforts to slash costs during its bankruptcy case.